Healthcare – Thriving in the most populated state of Malaysia

Selangor has become a role model of modern Malaysia with advanced infrastructure, job opportunities and a high standard of living. From this successful policy-background of urbanization and thereby population growth, new key challenges arise and often require new technologies from abroad. Healthcare, including in a wider sense related industries from pharmaceuticals to medical devices, is probably the most formidable of those challenges.

With 5.6 million citizens living directly in Selangor and being in close proximity of the Federal Territories of Kuala Lumpur (1.7 million) and Putrajaya (0.1 million), the healthcare sector in Selangor caters to the highest population-density of Malaysia in the most populated state. In this environment of dynamic growth, the society is aging fast and catching up with the western world, which will result in about 10% of the population being 60 and above in 2020. Related healthcare challenges are surging. Based on an improving standard of living the likeliness of lifestyle diseases such as morbidity, diabetes, heart or liver diseases, has been rising ever since. Especially the generation 60+ is prone to overweight according to a recent survey, which found 23.2% of people between 60 and 69 to suffer from this condition. Facing a population growth of at least 1.6% in Selangor, more pharmaceuticals, medical devices and healthcare services are needed. How does Malaysia cope with this demand? Most sophisticated devices and supplies are imported from overseas until today, which offers a huge potential for German manufacturers.

The Malaysian government started to promote Healthcare Tourism already in 2005. The initiative targeted affluent foreigners with a more affordable and in regional perspective a more advanced healthcare system. In 2009, this effort led to the foundation of the Malaysian Healthcare Travel Council (MHTC) to professionalize promotion and marketing. The council currently promotes 69 private panel hospitals, of which 18 are located in Selangor and 22 in Kuala Lumpur. With some top medical device companies such as Siemens Healthcare located in Malaysia, especially privately operated Malaysian hospitals are well equipped for foreign patients. It is not surprising that under these circumstances, the Klang Valley (Selangor and Kuala Lumpur) boasts an occupancy rate of more than 70% in all hospitals. This is close to the maximum, since at least 10% have to be reserved for emergencies.

_{Table 1: Investment Projects – Healthcare in Selangor (2012)}

Operator	Project	Beds	Operational
KPJ Healthcare	KPJ Klang Specialist Hospital	200	2012
Sime Darby Healthcare	SDMC Ara Damansara	220	2012
Sime Darby Healthcare	SDMC ParkCity	300	2013
Others	Columbia Asia Hospital Petaling Jaya	90+	2014

^{Sources: KPJ Healthcare, Sime Darby Healthcare, The Star 2011/2012}

While medical doctors and experts in many fields are needed urgently, private healthcare providers continue to expand with modern hospitals trying to meet the rising demand. The largest private operator KPJ-Healthcare Group, but also other players such as Pantai-Parkway or Sime Darby Healthcare are entering the market with several modern and specialist hospitals in Selangor. Table 1 is giving an idea of already announced or started projects. It is also worth mentioning that the thriving private healthcare sector is outmatched in numbers by a rather complacent public hospital sector. Public healthcare is cheap in Malaysia, but does often not meet the highest international standards. Modern equipment is rare and the replacement rate low.. Nevertheless, the sheer number of publicly operated hospitals is significant enough to create market potentials for foreign and domestic suppliers.

Until today, the vast amount of medical equipment is still acquired abroad or procured from multinational corporations invested in Malaysia. With a growth rate of about 10%, the medical device sector has become an interesting potential for German suppliers of advanced healthcare equipment. Many products have still to be imported, but some homegrown Malaysian businesses are now global market leaders. In Selangor especially the rubber glove industry is acknowledged for its globally leading brands such as Top Glove or Hartalega Holdings. Top Glove is said to maintain a global market share of 25% and plans to expand this share to 30 % during the next years. Being the world’s largest rubber glove manufacturer, the company plans to invest RM 3 billion in several facilities worldwide, which includes plants in Selangor. Top Glove has shown great interest in German process technology and machinery to reduce the dependency on manpower. This trend extends into many sectors due to a recently introduced minimum wage policy in Malaysia. Another trend is also playing into the hands of machinery manufactuerers. Globally, rubber gloves are replaced by more hygienic synthetic products. Consequently, Top Glove expands its activities in the product line of synthetic rubber gloves, which will require new equipment and machinery. The global trend to reduce natural rubber gloves and replace them with synthetics starts to put pressure on many manufacturers.

Since Top Glove follows a quite aggressive expansion strategy, Hartalega Holdings also announced a new and fully integrated high-tech factory, which includes a 58-MW-Biomass power plant, research and recreation facilities on 100 acres of land. The project is valued at RM 1.5 billion and will certainly be located in Selangor. With an estimated workforce of 4.600 employees, the facility marks a significant step forward and will require substantial automation technology to achieve an output of 24.5billion units per annum. Besides, Hartalega has to respond to the same trend for synthetic gloves as Top Glove.

_{Table 2: Top Pharmaceutical Companies in Malaysia 2011/12}

Position	Company	Market Share (%)	Growth (%)
1	Merck, Sharp & Dohme	8.5	14.0
2	Pfizer PH	7.7	5.1
3	Glaxosmithkline PH	6.6	-11.6
4	Sanofi-Aventis	5.2	8.4
5	Novartis	4.7	12.6
6	Roche Pharma	4.7	5.1
7	Astrazeneca	4.1	5.0
8	Pharmaniaga	3.1	2.8
9	Abbott Pharma	3.1	13.2
10	Janssen Cilag	2.4	1.7
11	Idaman Pharma	2.1	12.4
12	Boehringer Ingelheim	2.1	13.4

^{Source: IMS Health 2011}

The rubber glove industry demonstrates the innovative energies and talents in Selangor’s industries, since rubber has a long history in Malaysia. Pharmaceuticals again is a rather new industry with less historical baggage, but also rather in an early stage of development. In ther words, most pharmaceuticals still have to be imported from the developed world, but domestic manufacturers are catching up. The large generic drug market from India starts to create spillover effects into Selangor, which might increase based on a recent Investment and Trade agreement. In addition, international corporations such as Bayer Schering PH, Boehringer Ingelheim and Merck Sharp & Dohme are active in Malaysia, but often do not produce in the market. This is surprising in so far, since Malaysia offers a far better legal framework and a stronger protection of intellectual property. Accordingly, registering devices or pharmaceuticals in Malaysia also opens doors within other members of the Association of Southeast Asian Nations (ASEAN), which will become more significant with further economic integration in the next few years. Back in Malaysia local manufacturers Idaman Pharma and Pharmaniaga command a market share of 2.1 % and 3.1% respectively, compared to 8.5% of market leader Merck Sharp & Dohme. Both Malaysian players are located in the Klang Valley and manufacture in Selangor. In addition, large multinationals such as GlaxoSmithKline or the local Chemical Company of Malaysia established manufacturing operations in the state. While northern Malaysia also hosts some pharmaceutical companies, most sales and representative offices are located in Selangor’s pulsating commercial hub of Petaling Jaya. Selangor can be considered to be the heart of healthcare and especially the related manufacturing sector.

Looking at the trends of healthcare and related industries, Selangor and its facilities provide an excellent springboard for further business activities into Malaysia and ASEAN. With excellent logistics facilities, a Top 13 World Container port and two airports, Selangor is a powerhouse of connectivity. As soon as the ASEAN Economic Community is implemented, the region will become even more attractive due to lower trade barriers and mutual recognition of product registration in a market of more than 600 million people. In this context, new projects have already been confirmed in the pharmaceuticals sector, which will clearly increase the manufacturing capacities of the state tapping future potentials. Furthermore, Chinese medical device manufacturers have been evaluating Selangor as a potential investment destination in 2012. Indian and Chinese corporations are set to be the next generation of industry movers and shakers, but US, Japanese and European corporations still dominate the market.

This article has been published in the AHK Malaysia Magazine " MGCC Perspectives" May/June 2013.

Buzzword Clean Technology – Selangor’s Diversified Approach

I recently revamped my clean technology article looking into the local green and clean tech landscape. This article was published in the magazine of the AHK Malaysia. Hope you enjoy reading it. I did not have the time for fancy charts.

Clean technology has become a buzzword for an industry worth USD 360 billion globally. Tapping on this potential, the state of Selangor embarked several years ago on a journey to strengthen the local profile in regard to clean and green. As for many projects, it has proven to be a long-term challenge, in which new investment projects and technology from abroad are playing a key role, while utilizing Selangor’s own resources in a sustainable way has to be the benchmark.

As for many countries, the rise of solar energy had also a major impact on Malaysia, which made the sector a key target for investment promotion. Selangor has been able to attract a significant investment valued RM 5 billion from the German manufacturer Q.Cells, which today is integrated into the Korean Hanwha Group. Together they form the third largest global solar manufacturer and represent a significant part of the clean technology drive into Selangor. In the meantime, especially solar – related industries, including poly-silicon production, have started to add-on a reliable supply chain to the initial investment activity from Q.Cells and the like. Nevertheless, solar has become more than a manufacturing business. The Malaysian government offers a renewable energy feed-in tariff and respective annual quotas (for more information: www.seda.gov.my). As a consequence, real estate developers among others have started to include solar energy in their housing development projects, also providing energy to shopping malls (e.g. Setia City Mall) as well as office buildings. In the Klang Valley with a booming construction industry, growing the fastest by 22.2 % (RM 4.99bn) in the last quarter of 2012, planned as well as operational renewable energy plants show the highest density compared to other states (compare www.seda.gov.my).

Construction and real estate remain a strong topic for clean technologies, since not only different applications of renewable energy are highly related, but also sectors such as green building with a host of new clean technologies. Panasonic brought together experts on clean technologies and building to announce the concept of “Building an Econation” in 2012. In line with this development, the company established facilities under its new Panahome Building Technologies unit in Selangor to present its innovative technologies in regard to building materials. German corporations, having a strong technology-leadership in such sectors, could benefit from this trend and the ongoing boom in construction and real-estate development.

Moving on to a new stage of clean technology applications, other services sectors have adopted the new trend swiftly. One exemplary development refers to business and IT process outsourcing. Malaysia is known to be one of the top 3 outsourcing destinations globally (A.T. Kearney Global Services Location Index 2011/12) and has identified data centers to be a new growth industry of the future. In this context, the current craze is all about lowering the carbon-footprint of clients. Especially large multinationals are analyzing different strategies to achieve a lower carbon-profile and appreciate the clean technology initiative of data center providers in Malaysia. Besides, evaluations show that a clean tech data center is able to achieve cost-savings of up to 30%. Out of this perspective, it is not surprising that in 2011/12 new investments of approx. RM 400 million in green and clean data centers were announced and implemented. With more than 80 % of all data centers and related companies located in the Klang Valley, which includes more than 60 % directly in Selangor, the industry is a serious contributor of clean technology solutions within the state.

Selangor’s economy contributes more than 22 % of the Malaysian gross domestic product and is with an urbanization of 91.4 % also the most developed state in the country. For German technology leaders, the state of Selangor offers many opportunities beyond earlier mentioned trends. Some of these sectors are biotechnology, water treatment and waste management, technologies reducing carbon-dioxide emissions as well as improving energy-efficiency.